Worldwide server market revenues decrease 7.7% in first quarter

According to the International Data Corporation (IDC) research group (www.idc.com), factory revenue in the worldwide server market decreased 7.7% year over year to US$10.9 billion in the first quarter of 2013 (1Q13).

This is the fifth time in the previous six quarters that the server market has experienced a year-over-year decline in worldwide revenue. Server unit shipments decreased 3.9% year over year in 1Q13 to 1.9 million units as consolidation continued to be a strategic focus for many large and small customers around the globe.

On a year-over-year basis, volume systems experienced a 3.1% revenue decline. This was only the third time in the previous fourteen quarters that volume system demand declined year over year. At the same time, demand for midrange and high-end systems experienced year-over-year revenue declines of 18.3% and 17.1% respectively in 1Q13. The midrange and high-end markets were impacted by difficult year-over-year compares combined with transitions in the technology refresh cycles typical for these segments.

"Customer demand for new servers is being impacted by ongoing server consolidation, technology transitions, and challenging macroeconomic conditions across the globe. In fact, every geographic region except Asia/Pacific experienced revenue contraction in the quarter," says Matt Eastwood, Group Vice President and General Manager, Enterprise Platforms at IDC. "It is clear that challenging market conditions are increasing the competitive dynamics for server market share globally, particularly since compute represents a critical element of larger IT transformations that continue to reshape broader enterprise IT market opportunities."

HP held the number 1 position in the worldwide server market with 26.9% factory revenue share for 1Q13. HP's 14.8% revenue decline included weak demand for x86-based ProLiant servers, which were challenged by competitive pricing pressure, and continued weakness in Itanium-based Integrity server revenue.

IBM held the number 2 spot with 25.5% share for the quarter as factory revenue decreased 13.4% compared to 1Q12. Demand for IBM's Power Systems and x86-based System x servers declined year over year while demand for System z improved solidly in the quarter due to the combined effects of a weak year-over-year compare and the continuation of a refresh cycle.

Dell maintained the third position with 18.5% factory revenue market share in 1Q13 as factory revenue increased 10.1% compared to 1Q12. Dell gained 3.0 points of worldwide server market share in the quarter, helped in part by strong demand from their density optimized datacenter solutions business. Fujitsu, Oracle, and Cisco ended the quarter in a three-way statistical tie for the number 4 position with 5.1%, 4.8%, and 4.1% factory revenue share respectively. Fujitsu's 1Q13 factory revenue decreased 8.5% compared to 1Q12 and Oracle experienced a 26.2% year-over-year decline in factory revenue in 1Q13. Cisco's factory revenue was up 34.9% year over year in 1Q13.

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